Tuesday, July 20, 2010

Could a budget crisis reform teaching?

Tight budgets are causing many local governments to revisit labor agreements in search of cost savings. Around Milwaukee we've seen labor concessions to avoid layoffs at MATC and the city; unpaid furlough days at the city and county; and teacher layoffs at MPS. While a portion of the laid-off teachers were called back last week, the MPS layoffs have been portrayed as the most drastic labor management tactics of any local government in response to the budget crisis.

Facing its own budget troubles, the Chicago Public School District (CPS) is also looking at the potential for layoffs. But the CPS board of education approved a new policy last month that would prioritize the release of tenured teachers with the poorest performance ratings over newer teachers with higher ratings. The policy would save the district money every time a more costly senior teacher is laid off instead of a lower paid, more recent hire. The policy would go into effect if the district reaches class sizes of 35, another attempt at coping with a gaping budget hole, or if student enrollment drops enough to require layoffs.

The Chicago teachers union is arguing that the district cannot implement the policy, as it violates the negotiated teacher contract. The contract, in place since 2007, requires layoffs to be based on seniority. The district claims state law allows it the discretion to use teacher performance evaluations in making layoff determinations. The district and the union are debating whether the discretion granted by the state law is abandoned when a district signs a contract that does not include a provision for performance-based layoffs. (The union also contends that the teacher evaluation process is too arbitrary to be used for this purpose, a universal issue with regard to teacher performance measurement.)

If CPS prevails, it will be among the first to abandon the traditional "last hired, first fired" model for mass layoffs. However, it is not likely to be the last. Education reform advocates wanted the $10 billion federal education jobs bill, which passed the House July 1 and is now pending in the Senate, to include a provision requiring states to outlaw seniority-based layoffs in order to be eligible for the aid. (The bill does not contain the provision.) Arizona is currently the only state with such a law on the books, although Gov. Schwarzenegger has stated his support for a similar proposal in California.

While Wisconsin has yet to take on the issue, it is not unreasonable to expect pinched districts to look for new ways to relieve their budgetary stress. Education reform is not usually driven by the need to save money and often, in fact, requires an influx of money. Could this be the reform that structural deficits hath wrought?

Tuesday, July 13, 2010

Previewing next year's Milwaukee County budget

This morning, the Public Policy Forum released its latest report analyzing the fiscal predicament of Milwaukee County government. The report previews the county's 2011 budget scenario and also includes analysis of its five-year fiscal outlook.

In the past, we have raised sharp concerns about the county's fiscal condition and we have been critical of its inability to address its challenges strategically (see previous reports here and here). In this report, we give credit where it is due for some recent encouraging developments, including the county's success in reducing health care and incarceration costs and its creativity in developing public-private partnerships to support the parks and other functions. We also praise its new commitment to long-range fiscal forecasting and strategic planning.

Unfortunately, our assessment is that those positive steps have allowed the county to move the ball from its own 10-yard line to perhaps its own 20 or 25. It still has a ways to go before even reaching midfield (let alone the goal line). Meanwhile, it has gale-force winds in its face in the form of the region's and nation's larger economic challenges and the state's overwhelming budget difficulties.

Additional findings and observations from the report:

  • Bridging the county's 2011 budget gap of $20-$45 million may require consideration of several stark options, including wholesale elimination of programs and services and/or closure of certain parks facilities or animal exhibits at the zoo.
  • The county's five-year outlook forecasts continued growth in annual budget gaps, reaching $126 million in 2016. We modeled hypothetical scenarios in which the county would raise property taxes by 6.6% in each of the next five years or significantly curb the projected growth in wages and benefits, and those scenarios may not even cut the projected hole in half by the end of the five-year period (though they could produce considerable progress over a lengthier time frame).
  • Even if the county employs a series of drastic options modeled in our report to address its structural gap, it will fail to get at other major non-budgeted problems, such as maintenance and capital needs in its parks, loss of stimulus dollars for its transit system, and a series of operational and physical concerns at its mental health complex.

The intention of this report is not to add to the gloom and doom that often surrounds Milwaukee County government, but to encourage county policymakers and civic leaders to continue their focus and recent progress on long-term financial solutions. We also suggest, once again, that a balanced approach employing service reductions, revenue enhancements, wage and benefit concessions and sale or lease of assets may be the best strategy for bringing Milwaukee County's financial situation back into balance.

The full report can be accessed here.

Friday, July 9, 2010

Impacts of decreasing property values on government budgets come into focus

The Public Policy Forum's annual report on property values and taxes in southeast Wisconsin was released this morning with a not-so-surprising conclusion: property tax rates are on the rise as local governments and school districts struggle to maintain existing service levels in the face of declining values.

The Forum has been compiling taxing, spending and property valuation data from each of the region's seven counties and 146 municipalities since 1992. This year was the first in which property values in the region declined, with the aggregate value diminishing 1.3% between 2008 and 2009. Yet, despite this decline in value, the property taxes levied by local governments and school districts in the region increased by 3.9%, a reflection of the fact that the aggregate property tax rate in the region grew by $1.02 per $1,000 of value, or 5.3%.

The good news - if one can call it that - is that the average homeowner paid less in property taxes for the 2010 tax year than he or she paid in 2009. That's because one's property tax bill is determined not only by the tax rate, but by the assessed value of one's home. Because the value of the average residential property decreased by more than 9%, the average homeowner in the region actually saw his or her overall tax bill drop from $4,607 to $4,401.

So what's the takeway from all of these numbers? We suggest it's that state and local elected officials will continue to face a monumental challenge keeping rates down while maintaining existing service levels, and that property owners soon will notice the difference. Indeed, this data further illustrates the need for revenue diversification at the local level, a topic we're hoping receives greater attention as races for governor and the state legislature heat up.

To access the full report, click here.

Thursday, July 1, 2010

Program at a crossroads

Since its establishment in 2005, the Main Street Milwaukee (MSM) Program has been a highly touted economic development program designed to promote economic growth and revitalization in six selected city neighborhoods. MSM - a partnership between the City of Milwaukee Department of City Development (DCD) and the local chapter of the Local Initiatives Support Corporation (LISC) - is a key component in the city’s overall economic and community development strategy.

In light of the program’s important role in city development, the Forum’s 2009-2010 Norman N. Gill fellow, Sandra Zupan, took a look at the MSM and its outcomes. Her report, Main Street Milwaukee: Program at a Crossroads, explores the program's public and private investment, financial sustainability, expenditures, outcomes, and governance.

The report’s key findings include:

  • The total investment in the MSM program between 2005 and 2009 was $3.3 million. Although the goal was for public and private investments in the MSM Program to be equal, the public portion accounted for 64% of the overall investment, while the private portion accounted for 36%.

  • While the MSM neighborhoods were originally planned to be financially self-sufficient within six years, none of the districts will meet this goal and in fact, public investment continues to be crucial for sustaining the program.

  • As a result of the program, more cohesiveness and stronger working relationships have been created among stakeholders within the neighborhoods.

  • When compared to the program's estimated outcomes over its first five years, the total private investment in exterior building improvements exceeded estimates by a considerable amount. However, the number of businesses created in the neighborhoods is 86% of the original estimate, while 57% of the estimated jobs have been created.

The MSM Partners Board, made up of public and private officials, recently initiated an effort to consider substantial restructuring of the MSM program. As they move forward, the report urges them to consider the following issues:

  1. The MSM program goals need clarity, and may need to be revamped in order to be more suitable for Milwaukee’s low-income neighborhoods;

  2. The mismatch between the intended goals of the program and the purpose of the program’s main funding source likely has contributed significantly to the program’s failure to meet initial estimates, and needs reconciliation;

  3. The program structure is overly complex and coordination among the neighborhoods and partners is poor;

  4. Transparency and accountability for achievement of outcomes is lacking;

  5. Resources need more leverage, and the program's branding, marketing, and visibility are insufficient; and

  6. More volunteers are necessary for the program to be viable.
Finally, the report points out that city officials, LISC, and the MSM Partners Board may wish to research further whether there is a tangible connection between economic development improvements in Main Street neighborhoods and the program itself. In addition, the overall question of how the city's economic and community development strategy relates to its anti-poverty strategy is ripe for future research and analysis.

For the full report, please visit the Forum's website.

Special thanks to the Gill family for their generous support of this project through the Norman N. Gill Fellowship.